After becoming Bank governor, King explained that Bank of England policy was "similar to that of the Federal Reserve" under Alan Greenspan. Greenspan described his approach as "mitigat[ing] the fallout [from the bursting of a bubble] when it occurs".[11] King agreed with Alan Greenspan that, "It is hard to identify asset price 'bubbles'."[11]

Other warnings about the UK housing market followed, including from the National Institute of Economic and Social Research in 2004[12] and the OECD in 2005.[13] King noted the "unusually large" difference between the RPIX and CPI at the beginning of 2004 (the latter does not include house prices as part of its inflation measure, whilst the former does),[14] and, six months later, that UK house prices had risen "to levels which are well above what most people would regard as sustainable in the longer term", having increased by more than 20% over the preceding year and more than 100% over the preceding five.[15]

In 2005, The Economist described the run-up in UK house prices as forming part of "the biggest bubble in history",[16] and, by October 2007—when the UK housing bubble was at its peak[17] — the IMF was reporting that the UK housing market was "overpriced by up to 40 per cent".[18] As noted by the OECD, house-price volatility "can raise systemic risks as the banking and mortgage sectors are vulnerable to fluctuations in house prices due to their exposure to the housing market."[19]

Another result of the financial crisis was King's rejection of the bank's devout focus on price stability, or inflation targeting, a policy that was instituted after Black Wednesday in 1992 and that was continued by King after becoming governor in 2003.[27] One of the two early lessons King drew from crisis were that "price stability does not guarantee stability of the economy as a whole" and that "the instruments used to pursue financial stability are in need of sharpening and refining."[28]

The 2012 Financial Services Bill, in transferring the majority of macroprudential regulatory powers from the FSA to the bank, will grant the Financial Policy Committee (chaired by King) the power to curb lending in booms, including placing limits on the public's access to mortgages.[29] A former, senior BoE official summed up the bank's pre-crisis performance: "How can you look back with the benefit of hindsight and see it as a success? We were responsible for financial stability and we utterly failed to take any avoiding action against the greatest financial crisis in our lifetimes".[4]David Blanchflower said that, even as late as the summer of 2008, King did not even see the financial crisis coming.[30]

In its review of Bank of England accountability, one of the major complaints of the Treasury Select Committee was the bank's refusal to undertake an internal review of its performance during the financial crisis.[31] Such a review would pose difficulties since evidence on how its most senior policymakers arrived at their decisions was destroyed as a matter of course.[31] By contrast, the United States publishes the Federal Reserve's deliberations with a five-year lag, which have provided "the most detailed picture yet of how top officials at the central bank didn't anticipate the storm about to hit the U.S. economy and the global financial system."[32] As in the UK, the US central bank's failure led to a new regulatory framework, the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act.[32]

King argued that when the financial crisis and bank meltdown hit in autumn 2008, he and other Western central bankers "prevented a Great Depression", in part by cutting interest rates to virtually zero. The Economist agreed, saying that he "has a point".[33] A 2012 review of actions taken by Western central banks in the face of the crisis also supported King's claim.[34] The bank has faced criticism, however, for the pace of the rate cuts, which took five months from the beginning of October 2008 to get down from 5.0% to 0.5%, where they remained for several years.[35][36]

King abandoned his institution's remit on keeping inflation around 2%.[37] After becoming only the second Bank of England governor to speak to the TUC in its 142-year history, King conceded that people were "entitled to be angry" about unemployment and the bank bailout.[38]

King has been scathing about the banking sector since it crashed, especially its "breathtaking" £1 trillion bailout and its continuation of bonus awards in 2009, calling for a serious review of banking's structure and regulation.[39]

In a The Daily Telegraph interview in March 2011, King said banks had "put profits before people", that failure to reform the sector could result in another financial crisis, and that traditional manufacturing industries have a more "moral" way of operating.[40] In an interview with The Times in March 2012, he said that the banks are still in denial about the "very real and wholly understandable" anger that is felt at their behaviour,[41] Bankers have not been happy with his excoriating views and insistence on avoiding moral hazard, but King insists that "[m]arket discipline can't apply to everyone except banks", pinpointing the banks' sense of grievance on their finding it "very, very difficult to face up to the failure of their banking model".[41]

With King's term as governor ending in 2013, top UK banks have warned that unless a less "hostile" figure is found as a successor, they may feel it necessary to move abroad.[42][43] On 26 November 2012, Mark Carney was named as King's successor.

King had faced accusations[who?] of refusing funding to the Northern Rock Bank, precipitating a run on that bank, a situation not seen in the UK since 1914.[44] King later said that it had been the chancellor, Alistair Darling, not he, who had the final word on refusing the necessary help to Northern Rock.[45] In his review of King's tenure as governor, Times journalist David Wighton wrote:

Sir John Gieve, the Deputy Governor for financial stability, . . . was widely seen as the fall guy for the Bank's dithering over Northern Rock a few months earlier. In fact, he had been urging King to act, and his allies accused King of failing to defend him when the chairman of the Commons Treasury Committee accused Gieve of being "asleep in the back shop while there was a mugging out front". Gieve's mother had died at the height of the Northern Rock crisis and he had taken a few days off. King failed to make clear to the committee that this was why his deputy had been away. King's behaviour had been "very bad form", according to one former Bank director.[42]

In his memoirs, Alistair Darling was critical of King for emphasising moral hazard—the doctrine of not saving the banks from the consequences of their own mistakes—instead of rescuing the banks by pumping money into them as the banking-system meltdown occurred in autumn 2008.[46] Despite his refusal to give funding to the retail banks, he retained his job, and submitted in defence to a Treasury Select Committee (New York Times/Financial Times, 20 September 2007) that his actions were on the basis that the Bank of England was the "lender of last resort" but subsequently supported moves to provide funding to those banks which had been nationalised or partly nationalised.[citation needed]

It has been alleged that King's Mansion House speech for 2009 helped to bolster the Conservatives during the approach to the general election by issuing high-profile criticisms. King called for the break-up of the country's biggest banks, as well as arguing that, unless the bank was given more active, interventionist powers to ensure financial stability, it would be like a church: able to "do no more than issue sermons or organise burials."[28][42] King later advised a rebalancing of the economy, increased saving, and an "elimination of the structural deficit".[39] In November 2009, he told MPs that the then Labour government's intention of halving the deficit over the next five years was insufficient.[47] In May 2010, just days after the Coalition government was formed,[48] King said he had spoken to Chancellor George Osborne and supported his plans to cut spending by a further £6 billion within the 2010–11 fiscal year.[47] The Liberal Democrats did not need to be talked around to agreeing to the severity of the cuts.[49]

In November 2010, it was revealed that some senior staff at the Bank of England (one of them was David Blanchflower)[30] were uncomfortable with King's endorsement of the government's public spending cuts, accusing him of overstepping the boundary between monetary and fiscal policy. King's support for the government's cuts was in spite of concerns within the bank that cutting spending so rapidly could derail the UK's nascent economic-recovery.[47] These revelations led to accusations of King being a "coalition courtier"[50] and of making "excessively political"[51] interventions with regard to UK economic policy.[49]

The accusations were given greater weight after the December 2010 WikiLeaks Cablegate.[52][53] As a result of the WikiLeaks disclosures and David Laws' account of the Tory-Lib-Dem coalition-talks, King was asked by the Political and Constitutional Reform Select Committee to explain why he was seemingly cited in the talks as backing Tory plans to introduce spending cuts this year.[54] King insisted to the committee that "at no stage did I offer any advice on the composition of any measures designed to reduce the government deficit";[55] the committee implicitly accepted King's explanation of events as he is not even mentioned, let alone criticised, in their final report.[56]

According to George Osborne, Gus O'Donnell made an offer to have King brief the Tories and Lib Dems during the Coalition's formative talks; however, the parties suspected they "knew what he was going to say and . . . also thought it was more appropriate for our Treasury spokesmen to talk to him".[57]

King was criticised again in May 2012 on BBC Radio 4's Today programme, on the day before an election, after he expressed approval of Coalition austerity measures.[58]

In a speech to the European Parliament in Brussels in May 2011, King commented that the Bank of England was more concerned with the broader stability of the economy and banking sector than with inflation figures: "The economic consequences of high-level indebtedness now would become more severe if rates were to rise. It is the main reason why interest rates are so low."[59] With regard to Project Merlin, King was critical of Chancellor Osborne's misleading figures, and correctly predicted in a "light plausibility check" that Merlin would be a failure.[60] In March 2009, King said any plan for a second fiscal stimulus by the UK Government had to be done with caution.[61]

In his Mansion House speech in June 2009, King criticised Chancellor Alistair Darling for resisting significant changes to the allocation of regulatory responsibilities between the FSA, the Treasury and the bank, which would have given the bank greater power to fulfil its role of ensuring economic stability.[62][63][64]

In January 2012, King received a letter from the government's former chief scientific adviser Sir David King, Zac Goldsmith, former environment minister John Gummer (and 17 others) warning of the possibility of a carbon bubble.[65] King agreed to an evaluation of the matter.[66]

The BoE's Financial Policy Committee, established to identify emerging bubbles in the financial system, agreed in March 2012 to ask Parliament for new policy tools to be used to prevent another financial crisis. King said that the FPC narrowed its choice of instruments to three—the power to ensure banks have countercyclical capital buffers, the ability to force banks to hold more capital against exposure to specific sectors judged risky, and the power to set leverage ratios—because it will be important to explain to parliament and the wider public why it is or is not using them.[67]

King is a fan of Aston Villa F.C.. He once arranged a game between Bank of England employees and ex-Villa players.[69] He served on Villa's board of directors from February until April 2016, and then he, along with fellow board member former Football Association chairman David Bernstein, resigned in protest against owner Randy Lerner's stewardship of the club.[70]

Within a Circlet of five Pears Sable, three manifest, an Oast House Or, the roof Argent.

Escutcheon

Azure, a representation of the central façade of the Bank of England Argent, between two Flaunches Or, each charged with a Book Argent, bound Murrey, clasped Or.

Supporters

Dexter: a Lion Or, holding in the sinister forepaw a Caduceus Bleu-Celeste, the rod Murrey. Sinister: a Lion crowned with an Ancient Crown Or, the dexter foreleg in Armour Argent, holding in the Gauntlet a Sword fesswise Bleu-Celeste, hilt and pommel Murrey.

Orders

Order of the Garter (Appointed 2014)

Order of the British Empire (Appointed GBE 2011)

Banner

The banner of the Baron's arms used as knight of the Garter depicted at St George's Chapel.

^King, Stephen (7 February 2012). "We can't reboot the economy without sacrifice". The Times. Retrieved 7 February 2012. Until the latest episode, the UK's deepest postwar downswing was in the early 1980s. Despite the concerns of 364 economists—including Mervyn King, now the Governor of the Bank of England—who wrote in 1981 to The Times to argue that we were doomed, the British economy staged an impressive rebound.

^"The global housing boom: In come the waves". The Economist. 16 June 2005. Retrieved 8 March 2011. According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries' combined GDPs. Not only does this dwarf any previous house-price boom, it is larger than the global stockmarket bubble in the late 1990s (an increase over five years of 80% of GDP) or America's stockmarket bubble in the late 1920s (55% of GDP). In other words, it looks like the biggest bubble in history

^Davies, Howard (23 June 2011). "Chinese Finance Comes of Age". Finance in the 21st Century. Project Syndicate. The authorities in Beijing, especially the CBRC and the People's Bank of China (the real central bank), have a good record of managing incipient booms and busts. . . . They have considerable flexibility, owing to a range of policy tools, including variable capital and reserve requirements and direct controls on mortgage lending terms. They have already been tightening the screws on credit growth for several months, with positive effects.

^Rabinovitch, Simon (18 November 2011). "Housing prices fall in Chinese cities". Financial Times. Retrieved 24 January 2012. Housing prices in a growing number of Chinese cities fell last month, weighed down by a sustained government campaign to deflate the market.

^Bloomberg News (21 November 2011). "China Real Estate at 'Tipping Point': Nomura". Bloomberg. Retrieved 28 March 2012. Premier Wen Jiabao said this month that the government won't relax property curbs. The government this year raised down-payment and mortgage requirements and imposed home purchase restrictions in about 40 cities to avert a bubble. The central bank increased interest rates three times and reserves ratio six times this year.

^Lex (28 December 2011). "China property". Financial Times. Retrieved 8 February 2012. China's authorities have spent much of the past two years trying to engineer a slowdown in property prices. Now they have got one ... [P]roperty has dropped down the list of top investment options for Chinese households[.] . . . That is what the Politburo wants to see.

^"China not to loosen regulations on housing market: premier". Xinhua News Agency. 14 March 2012. Retrieved 28 March 2012. Premier Wen Jiabao said [China] will not slacken its efforts in regulating housing prices, which he considered still 'far from a reasonable level. If we develop the housing market blindly, a bubble will emerge in the housing sector. When the bubble bursts, not only the housing market will be affected, it will weigh on the entire Chinese economy' .

^Wighton, David (12 March 2012). "The trouble we're in and how to get out of it". The Times. Retrieved 12 March 2012. Sushil Wadhwani, a former MPC member, says the committee could have warned that interest rates would, in future, be set higher than justified by the two-year inflation forecast, which would have dampened house prices. Australia followed just such a strategy.

^Granville, Brigitte (7 March 2011). "Targeting the Targeters". European Economies. Project Syndicate. Retrieved 16 February 2012. There is no mystery about what is going on. The price-stability mandate has been trumped by concerns about growth. The fear is that tightening monetary policy to bear down on inflation could snuff out the faltering economic recovery.

^For King's previous position see King, Mervyn (16 June 2004). "Speech at the Lord Mayor's Banquet for Bankers and Merchants of the City of London at the Mansion House"(PDF). p. 4. Archived from the original(PDF) on 3 December 2010. Retrieved 10 March 2011. [T]he Bank of England Act 1998 and the associated Memorandum of Understanding between the Bank, Treasury and FSA on financial stability . . . [f]reed [the Bank] from the responsibilities of day-to-day regulation, [meaning] the Bank has been able to focus on two principal objectives: maintaining monetary stability and maintaining financial stability. Those objectives are the essence of central banking.

^"King and Darling clash on banks". BBC News. 18 June 2009. Retrieved 14 February 2011. [T]he governor had, at one point, been opposed to the idea of the Bank becoming a super-regulator.